Apple displaces Samsung on home turf with IPhone
SEOUL: For more than a decade, Kim Jung Yeon only bought phones from Samsung Electronics Co. and LG Electronics Inc., passing on best sellers made by nonKorean companies such as Motorola Inc.'s Razr. Her loyalty ended with Apple Inc.'s iPhone.
"The iPhone has a cool design and I love the feel and grip of the phone," said the 37year-old Web designer in Seoul, who bought the device last year, and enjoys using applications about food recipes. "I don't see any reason why I should return to LG or Samsung phones again if I buy another smartphone."
Samsung and LG, the world's two-largest handset makers after Nokia Oyj, can no longer count on home-field advantage as they play catch up in the fastest-growing segment of the $163 billion global industry.
A year after Apple's phone debuted in Korea, LG is reeling from record phone losses while Samsung this week unveiled the Nexus S phone equipped with Google Inc.'s latest Android operating system to win back customers.
"Korean companies are going to face a tough situation overseas going forward, given how much share they are losing at home," said Han Eui Lim, a consultant at ROA Group Inc. in Seoul. "Especially in the case of LG, it's very concerning."
Samsung and LG shares have both underperformed the benchmark Kospi Index this year. Samsung has gained 11 percent and LG has declined 7.8 percent in 2010, compared with the index's 16 percent gain. Apple shares have surged 51 percent, helping it overtake Microsoft Corp. as the world's most valuable technology company. Fewer Carriers The iPhone, available in Korea only through KT Corp. as opposed to all of the nation's three wireless carriers for Samsung and LG, has sold about 1.6 million units since it went on sale in the country in November 2009, according to KT.
South Korea had about 4.52 million users of smartphones-devices that can be used to surf the Web, and play games and video-at the end of September, with a quarter of those being the iPhone, according to Nomura Holdings Inc. analyst Stanley Yang.
The iPhone created a "mobile big bang" by changing the way Koreans live and work, according to Digieco, a research division of KT, in a report last month.
Espoo, Finland-based Nokia is the world's largest maker of mobile phones, accounting for 117.5 million of the 417.1 million phones sold worldwide in the third quarter, according to research firm Gartner Inc. Nokia's share of 28 percent was followed by Samsung's 17 percent and LG's 6.6 percent. Apple was fourth with 3.2 percent, Gartner said last month.
Among smartphones, handsets using Nokia's Symbian software held market share of 37 percent in the quarter, with Android surging to 26 percent from 3.5 percent last year. Apple had 17 percent, according to Gartner.
Global handset revenue is forecast to be approximately $163 billion this year compared with $154 billion last year, according to Credit Suisse Group AG estimates.
Samsung and LG, which are adopting Google's Android, may have fallen behind in the smartphone market because of their external reliance on software, according to Peter Yu, a Seoul-based analyst at BNP Paribas SA.
"The iPhone and smartphones in general are mostly about software content-it's more of a cultural product," said Yu, who has a "reduce" rating on LG. "When the iPhone was introduced, the Korean companies were in a state of denial, they underestimated the potential."
LG replaced its chief executive officer and head of the handset-making division in October after the mobilephone business posted record losses for two consecutive quarters. -Bloomberg